Dan Loeb’s Advice for 2014 Investing: Pick Carefully and Be Patient

Hedge-fund manager Dan Loeb has a message this May Day: Ignore the old market adage “sell in May and go away.”

Bloomberg

In a letter to investors in his $14.3 billion fund, Third Point LLC, Mr. Loeb admits to being a bit too optimistic to start the year and says that hindsight shows “certain sectors were clearly exhibiting bubblelicious valuations.”

But he believes the pullback in stocks created the chance to add to positions at “attractive levels.” That means it’s time for the traders to come out.

“Four months into 2014, it now seems evident that investment performance will require a combination of good stock selection, patience, and deft trading,” Mr. Loeb writes.

The coming months, he predicts, aren’t going to get any easier. As the Fed nears the end of tapering. “We will have to buckle our seatbelts for an inevitably more volatile environment,” he says.

Third Point’s main fund rose 3.5% in the first quarter, besting the S&P 500’s 1.8%. Ally Financial Inc., Dow Chemical Co. and Sony Corp. were his best performing holdings, along with a bet on Greek government bonds. Dragging down performance were his investments in Japan, led by SoftBank Corp. (Mr. Loeb writes that SoftBank’s pullback was overdone.)